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Bankruptcy

3 pm

Lord Baker of Dorking asked Her Majesty’s Government:

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Truscott): My Lords, there were 62,956 bankruptcy orders in England and Wales in 2006.

Lord Baker of Dorking: My Lords, is the Minister aware that the figures he has just given to the House show that since 2002, when the Government eased bankruptcy regulations, the number of bankruptcies and IVAs has gone up by four times? During that period there has been no increase in the rate at which new businesses are formed. The Government have encouraged the feckless and improvident at the expense of the prudent and hardworking. Can the Minister recognise that the three great achievements of his Government have been to make it easier for people to get drunk, buy drugs and go bankrupt? Will that feature in the Blair legacy?

Lord Truscott: My Lords, there are a number of reasons why the level of individual insolvencies has increased, including the availability of credit, unemployment, other economic factors and specific reasons relating to the individuals concerned. I do not accept the noble Lord’s point that legislation has led to that increase in insolvency; after all, the number of those in insolvency has risen in Northern Ireland and Scotland, where people have not been affected by the same legislation.

Lord Newby: My Lords, will the Minister accept that there is another reason why there are such high levels of bankruptcy; that is, the very low levels of financial literacy in the UK? Will he further accept that the Government’s action in appointing Mr Thoresen to undertake a review in this area is, frankly, too little,

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too late? Does he agree with the IFS School of Finance that financial education should now be included in the national curriculum?

Lord Truscott: My Lords, the noble Lord has a valid point that far more needs to be done to educate people about indebtedness and how to deal with it. The Government are already doing a lot in that area; for example, we are giving grants totalling £47.5 million for advice agencies to hire and train more than 500 new debt advisers. We are giving an additional £21 million-plus to Citizens Advice this year to help it to provide support services and an extra £1 million to the National Debtline. In addition, we are working to ensure that we provide information and advice to young people—so we are doing a lot in this area, which will benefit hundreds of thousands of people.

Lord Swinfen: My Lords, in the 1960s and 1970s one could borrow only one and a half times one’s income and up to 85 per cent of the value of a property. Today one can borrow up to 125 per cent of the value of the property and about five times one’s annual income. To what extent has that affected the rate of bankruptcies?

Lord Truscott: My Lords, I am not sure that it has. The fact is that we have record low historic levels of interest rates, record levels of employment and GDP growth in the UK has now seen an unbroken 58 consecutive quarters of positive growth, so the economic background and environment is generally improving. However, it is true that indebtedness in certain sectors of society is increasing. The issue is how a minority of people deal with those debts. The level of insolvency in the UK is something like a quarter or a fifth of the levels in the United States, so I do not see the picture in the same terms as the noble Lord.

Baroness Wilcox: My Lords, if things are so good, how come people are struggling to hold on to their homes? There have been 91,000 court orders for repossession this year alone. Are the Government in the least concerned that the level of debt that they have encouraged is now throwing thousands of people into the misery of bankruptcy and repossession? What is the Minister going to do about it?

Lord Truscott: My Lords, of course the Government are always concerned about repossessions—but I recall the late 1980s and the early 1990s, when the levels of repossession went through the roof and when interest rates, under the previous Conservative Government, went up to 15 per cent. That created real difficulties for home owners.

Lord Teverson: My Lords, there is great concern about the potential mis-selling of IVAs, individual voluntary arrangements, and the distress that that will cause many in the future. How do the Government view IVAs?

Lord Truscott: My Lords, the noble Lord is correct; there are concerns about the advertising of IVAs. An IVA is a matter between a debtor and his or her creditors and it must be licensed by an insolvency

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practitioner. Insolvency practitioners are already subject to stringent regulatory regimes which apply both ethical codes and professional standards. The Government are keeping a close eye on that and monitoring it.

Lord Stoddart of Swindon: My Lords, does the noble Lord recall the wise words of a former general secretary of the Labour Party, Morgan Phillips, that the Labour Party owed more to Methodism than to Marxism? The Methodist regime believed in thrift, decency and community rather than in capitalism and market forces.

Lord Truscott: My Lords, it is an interesting philosophical point, but I did not know Morgan Phillips personally so I should not like to comment further.

Television Advertising (Food) Bill [HL]

3.05 pm

Baroness Thornton: My Lords, I beg to introduce a Bill to make provision about the advertising of food products on television programme services and for connected purposes. I beg to move that this Bill be now read a first time.

Moved accordingly, and, on Question, Bill read a first time, and ordered to be printed.

Consumers, Estate Agents and Redress Bill [HL]

3.06 pm

Read a third time.

Clause 18 [Secretary of State's power to require reports]:

Baroness Wilcox moved Amendment No. 1:

The noble Baroness said: My Lords, I return to this issue one more time. I noted that in Committee I was dissatisfied with the Government’s response. Having reread the debate, I consider that it is right to bring this matter back.

Put simply, this amendment would ensure that when the National Consumer Council publishes a report to give to the Secretary of State, it will also make a copy available to the public. The noble Lord, Lord Borrie, suggested that would infringe the powers in what is now Clause 17, but was Clause 16 on Report.

I direct noble Lords and the Minister to the exact wording of Clause 17, which states:

Any report published under that section may not necessarily cover a report prepared for the Secretary of State, as preparing reports for the Secretary of State does not fall within the scope of the NCC’s

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functions as described in Clause 17. Indeed, rather ironically, the National Consumer Council’s only statutory duty to report is to the consumer, in Clause 10. Clause 17 does little more than say that the National Consumer Council can publish reports if it wants to, but it has no duty to publish those reports when reporting to the Secretary of State.

Indeed, I suspect the real reason behind the Government’s resistance is that the Secretary of State can commission a report far wider in scope than that available to the National Consumer Council to report to consumers. Under Clause 18:

The scope of an average National Consumer Council report to the humble consumer comprises,

The second substantive point is that this amendment does not seek to proscribe the National Consumer Council’s publication. Rather, it seeks to ensure that there is direct communication and thereby accountability of the information going between the National Consumer Council and the Secretary of State. The National Consumer Council is not a government department, and information transferred from it to the Secretary of State should emphatically not be treated as classified, as it is under the Bill as it stands. This is a serious point, and I hope the Minister will be able to take it on board even at this eleventh hour. I beg to move.

Lord Borrie: My Lords, the noble Baroness mentioned my name in connection with the amendment because at the previous stage I intervened to query the relationship between Clauses 17 and 18. As I understand it—with the aid of a letter that the Minister sent to the noble Baroness, Lady Wilcox, the Liberal Democrat spokesman the noble Baroness, Lady Miller of Chilthorne Domer, and me, which is available in the Library—Clause 17 is on the general power of the National Consumer Council to,

It goes on to say:

That is the broad and expected facility of the National Consumer Council and its role.

Clause 18, which I understand better now from the Minister’s letter than I had previously done, is rather special. It is a special situation where the Secretary of State, involved in some particular consumer problem, wants the advice of the National Consumer Council and wants, within a specified period a report on some matter relating to consumer affairs. The clause states:

I would put it like this. In Clause 18, the National Consumer Council is being specially approached by the Secretary of State for a special governmental purpose, and in effect that report is then in the

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ownership of the Government as distinct from the National Consumer Council on this special occasion. A discretion should be retained by the Secretary of State because the possibility is that that report, if it is to be full, extensive and what the Secretary of State wants to assist his work, may contain price-sensitive or other information that it is undesirable should be made public either then or generally.

It seems to me that Clause 18 is a very special power of the Secretary of State to require reports of the NCC. It does not in any way inhibit the normal independence of the National Consumer Council from the Government, and rather, especially in the case of price-sensitive information, the Government wish to retain discretion over what is published. I did not fully understand that when I intervened in the earlier debate, but it seems to me to make a lot of sense. I do not support the amendment.

Lord Razzall: My Lords, I support the amendment. Unfortunately, my noble friend Lady Miller is not able to be here today due to a family crisis, but I know that she would endorse the remarks that I am about to make.

There is always a suspicion when we hear that the Government are going to have a role in the provision of information. I am afraid that, notwithstanding the fact that this Government brought in the Freedom of Information Act, we are always suspicious when a Government want to have their hands in what may or may not be published. I was struck by the remarks made by the noble Baroness, Lady Wilcox, on Report, when she said:

There can be no better argument for the noble Baroness’s amendment.

3.15 pm

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Truscott): My Lords, I am grateful to my noble friend Lord Borrie for his clear exposition, with which I wholly concur. We had a lively and helpful debate on this amendment on Report. From that debate and the earlier debate in Committee, it is clear that the intention behind the amendment is essentially the need for transparency in the Government’s dealings with the new council and public accountability. I can again confirm our wholehearted support for these intentions.

The discretion afforded to the Secretary of State by Clause 18 not to publish a report prepared for him by the council would be necessary to deal with particular circumstances, such as when the report contained sensitive information that was commercially confidential or price sensitive, as my noble friend Lord Borrie outlined. Such information might be necessary to support the recommendations in the report. However, a requirement on the Secretary of State to publish every report submitted to him might create a deterrent

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effect on external experts or stakeholders who might be reluctant to provide advice because it might be disclosed. Such advice may be shared with the council only on the understanding that it was not to be made public. Requiring the Secretary of State to publish every report submitted to him under Clause 18 could therefore deter the provision of useful or important information to aid the preparation of the report by the council, to the detriment of the quality of the final report and the subsequent advice provided to the Secretary of State. I cannot believe that that is the intention of the noble Baroness, Lady Wilcox, or the noble Lord, Lord Razzall.

A key consideration here is that there may be good reasons why the content of reports prepared and submitted to the Secretary of State to aid the decision-making process should not be published. While we envisage that the Secretary of State will generally wish to publish any report submitted to him under Clause 18, it is important that this discretion is retained in order to allow for what is appropriate in each case.

If the council determines that the issue of the report is one of interest to consumers more generally, as we envisage will generally be the case, Clause 18 does not prevent the council from exercising either or, indeed, both of the powers under Clause 17 or Clause 19(2) to prepare and publish reports or advice and information for the purpose of bringing issues of importance to the attention of the consumer. A report prepared under the powers in Clause 17, for example, that covered the same issue as a report prepared under Clause 18, could be published without information that was considered to be sensitive and in a format that may be more in line with the needs of consumers.

In light of my explanation and the fact that we have discussed this on several occasions, I hope noble Lords will understand why the Government do not feel able to accept this amendment.

Baroness Wilcox: My Lords, I thank the noble Lord, Lord Razzall, for supporting the amendment. I am not going to press it; I am just going to say that this is the death knell of the National Consumer Council as we knew it. What sort of information will the Government want the National Consumer Council to give them that the general public—the general consumer—cannot know about? Never in the past has the National Consumer Council had such a constraint on it and, if the clause remains, never in the future will the council be taken to be as responsive, as independent and as innocent of the Government’s agenda as it has been. I will withdraw the amendment at this stage and hope that my friends in another place may be able to persuade the Government further. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 43 [Standards for handling complaints]:

Baroness Wilcox moved Amendment No. 2:



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The noble Baroness said: My Lords, I shall speak also to Amendments Nos. 3 and 4. I am pleased to be able to revisit this issue with what I hope is an improved set of amendments. Amendment No. 2 would place a duty on regulators in Clause 43 to make regulations to require their providers to have in place and operate effective internal complaints-handling procedures. The amendment is complemented by Amendments Nos. 3 and 4 to Clause 46, which connect the proposed new provision in Clause 43 to the list of information that a supplier can be required to provide to the consumer. Overall, the amendments would ensure that regulated suppliers were required to have internal complaints-handling procedures and that the regulators could require the suppliers to communicate to their consumers how these procedures work.

I do not need to rehearse the arguments that I made both in Committee and on Report in this House. These amendments would put the consumer’s response to services at the heart of the consumers Bill. Complaints are not only one of the most accurate measures of how successful the delivery of a service has been but are a vital avenue for the consumer, especially with respect to essential energy and postal services.

I read with interest the words of the noble Lord, Lord Whitty, on Report. I had hoped that, had he been here, he would have been able to support the slight change in the wording, which he suggested. I agreed with him wholeheartedly when he said:

I was pleased that the Government came back with amendments that began to acknowledge the need for a best-practice element in the regulation of energy and postal providers. I hope that today the Government can realise the full potential of the Bill by accepting these amendments. They have the opportunity to send out a message that shows that the Bill will provide an incentive for a new culture in which responsible business practice empowers the consumer. It would be a great shame to miss such an opportunity. I beg to move.

Lord Razzall: My Lords, I support the amendment. My noble friend Lady Miller added her name to a similar amendment on Report. Having read the debates in Committee and on Report, having looking at the correspondence and having listened to what was said by the noble Lord, Lord Whitty, who, after all, will be responsible for this matter in due course—I am sorry that he is not in his place; the compliment that I normally pay him on these occasions is that he is always the best argument as to why we need not worry about this Bill—it seems to me that this has been a drafting issue. I do not think that there is any point of principle between all sides here. The noble Baroness has come up with an alternative to her original amendment which I consider to be better, and I hope that the Government will be in a position to accept it.

Lord Truscott: My Lords, I listened with great interest to the arguments made by the noble Baroness, Lady Wilcox, and others on this issue on Report. I

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agreed to give it further consideration, as the importance of the need for service providers to deal effectively with consumer complaints is in no way in doubt.

The position that we have adopted is to give regulators the power to make regulations to prescribe complaints-handling standards that would be binding on suppliers. We took this approach because we believe that a sectoral regulator is best placed to take a view on what is appropriate and necessary within its own sector. These provisions will need to be adaptable and will need to be applied on a sector-by-sector basis, with each regulator being able to take a different approach if required, to meet the needs of each sector.

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